With the growth of over the top (OTT) broadcasting, more and more people are cutting the cord and enjoying media through alternative means. Consumers have more ways than ever before to watch shows, movies, classes, and other types of broadcasts.
Businesses and organizations with media to share need to find the most advantageous way to distribute – and monetize – that content. With the right distribution and monetization model, you can scale a profitable business. And, with the wrong model, you might leave money on the table.
Advertising video on demand (AVOD) is a video monetization model many organizations are turning to to provide audiences with free, on-demand content, while still profiting from their viewership.
Who can benefit from implementing AVOD? Is AVOD this the right monetization strategy for your content and business goals? We’ll answer those questions and more in this guide to AVOD monetization.
Table of Contents:
- Video Monetization Basics
- What is AVOD?
- Pros and Cons of AVOD Monetization
- When to Monetize with AVOD
- Who Uses AVOD?
- Use Cases for AVOD
- Mixed Revenue Models
- How JW Player Supports AVOD
Video Monetization Basics
Before we give you a closer look at AVOD monetization, it’s helpful for you to have a primer on the three main monetization models for OTT media. They are: AVOD, subscription video on demand (SVOD), and transactional video on demand (TVOD).
AVOD
The advertising video on demand model lets viewers watch content for free in exchange for ad breaks before, after, and often during the content.
YouTube is an example of a media platform that relies on AVOD monetization. Casual YouTube viewers (those who don’t subscribe to YouTube Premium) are subjected to ads before, during, and after videos.
SVOD
A subscription video on demand (SVOD) model involves viewers paying a recurring, usually fixed, amount on a regular basis (typically monthly) to access a library of content. Traditionally, when viewers pay a subscription, they can watch library content without ads.
Netflix is an example of a media outlet with an SVOD monetization model. At time of publication, Netflix subscribers pay $9.99 per month for a basic plan to watch from one device at a time, $15.49 for a standard plan to watch from two devices at a time, or $19.99 per month for a premium plan that supports simultaneous playback on up to four devices.
TVOD
With a transactional video on demand (TVOD) model, customers pay to watch each piece of content they want to consume. Most TVOD-based businesses allow customers to purchase unlimited access to a piece of content for a higher price, and a limited-time rental for a fraction of the purchase price. Many companies that use a TVOD model usually offer recently released movies or shows on a pay-per-view basis, then make the content available through SVOD or AVOD as it ages.
While Amazon Prime Video’s main monetization model is SVOD based, it also lets customers purchase or rent movies and shows that aren’t available through its subscription service. For example, recently released movies can typically be bought for $19.99, while rentals cost $5.99 and give customers a month to begin watching the film and two days to finish it after they’ve started.
Now that you understand the basics of what your options are when it comes to video monetization, let’s dive deep into what you came here to learn about: AVOD.
What is AVOD?
Advertising video on demand is a way to generate revenue from over-the-top streaming content through advertising. You provide video content to your audience for free. In exchange for free (or sometimes subsidized) content, your audience has to watch ads before, during, and/or after the video. Your advertisers pay you to put their messages in front of an audience.
YouTube is one of the best known AVOD platforms. Audiences need to watch ads before they can watch a video, and if the video is long enough, it will usually be interrupted by more ads.
Tubi is another example of a platform that offers the free streaming of movies and shows from major studios accompanied by ads.
Pros and Cons of AVOD Monetization
Is an AVOD monetization model right for your business? Consider these benefits and downsides before making that decision.
Pros of AVOD
With an AVOD model, you can give viewers entertainment for free, or at a lower rate than if you were using a subscription-based or pay-per-view model. With audiences replacing their cable bills with multiple paid streaming services, AVOD is an appealing option for consumers. In fact, nearly three in five people are open to watching ads to reduce their entertainment bills.
Because of affordability to consumers, an AVOD model is great for customer acquisition. When customers don’t have to pay to enjoy your content, it’s easier to persuade them to come to your platform.
AVOD is also a good basis for a freemium model, in which you lure viewers in with your free offerings, delight them with great content, then upsell them on paid premium content through subscription fees or pay-per-view models without ads.
Finally, advertising video on demand monetization gives you an opportunity to build relationships with advertisers. These relationships can go beyond mid-video ads and could develop into sponsorships and partnerships for creating new content.
Cons of AVOD
The biggest downside of an AVOD model is that it can be difficult to retain customers. Because viewers aren’t financially invested in your platform, they can easily bounce from video to video and competitor to competitor whenever they want.
Additionally, people may not want their viewing experience to be interrupted by ads. To appease those customers, it’s best to offer a paid version of your AVOD services to ensure you’re not losing viewers or leaving money on the table.
Most AVOD-based platforms tend to offer less desirable, or outdated, content, which is part of the challenge of attracting and retaining viewers.
Furthermore, you usually need a very high volume of views to be able to generate revenue. You can typically make more per customer with an SVOD or TVOD model.
While building relationships with advertisers can be beneficial, it also requires a lot of time and resources, and builds pressure. Advertisers who aren’t happy with your viewership or results from being placed on your channel may leave, meaning you’ll have to develop new relationships.
When to Monetize with AVOD
An advertising-based video on demand monetization model is best for businesses that have large, loyal audiences.
For example, a traditional broadcaster like ABC already has brand recognition and loyalty for creating great TV shows over the years. With the advent of over-the-top streaming, ABC can retain audiences as they cut the cord by offering the free viewing of their new and archival shows with ads on their website.
Who Uses AVOD?
Lots of platforms are using AVOD models to hook in viewers with free entertainment. Here are several examples to look to for inspiration:
- YouTube: Online video platform YouTube monetizes and lets creators monetize content by playing ads before, during, and after videos. Nearly all content on YouTube is available to audiences for free thanks to this business model.
- Facebook Watch: Facebook Watch is the place where Facebook users can watch content uploaded by friends and brands on the social media platform, as well as where they can watch original shows produced by Facebook. Facebook makes these shows available for free by accompanying them with ads.
- Tubi: Unlike Netflix and Hulu, which have recently started giving customers a cheaper subscription rate in exchange for serving ads, Tubi’s movie and show library is 100% free to audiences thanks to ads they encounter during their programming.
- Roku Channel: Smart TV brand Roku has its own streaming service: Roku Channel. People can watch Roku originals and other entertainment for free by signing up for a free Roku account and watching ads during the shows and movies.
- Peacock: Peacock, NBCUniversal’s streaming platform, lets audiences consume some of its entertainment for free if they have a Peacock account and are open to seeing ads.
Use Cases for AVOD
An AVOD monetization model is a worthwhile option to explore, but it’s better suited for some scenarios than for others. Here are several use cases for which an advertising video on demand model is ideal:
- If you don’t have enough content to be able to charge a monthly subscription, AVOD monetization is a great option for generating revenue while you’re building up a content library. For example, if you run a fitness studio and are building your library of at-home video workouts, you can make your on-demand, online classes available for free with ads until you have a dozen or so ready to go.
- AVOD is a good way to make money from live streaming events. Monetize live streams with ad breaks. Because of the limited-time nature of a live event, you can generate a lot of viewers if you market the event sufficiently, which can boost advertising revenue.
- After a live streaming event, you can make the playback available for free streaming afterwards with ad breaks.
- Let audiences sample a show on your platform by making the pilot available for free viewing with ad breaks, then require audiences to sign up for your SVOD service or purchase or rent the rest of the season to finish it.
While SVOD and TVOD are popular monetization models, there are several occasions during which AVOD monetization just makes more sense.
Mixed Revenue Models
Although we’ve presented an advertising-based revenue model as a siloed option, you can benefit even more from AVOD by combining it with SVOD and TVOD. Some of the most popular media companies rely on mixed revenue models to give customers what they want, without leaving money on the table.
With a hybrid revenue model, you can maximize your sales from customers, regardless of whether their top priority is staying on budget or getting rid of ads.
AVOD With an Ad-Free SVOD Option
Since 41% of consumers are willing to pay to avoid ads, it’s important to offer those customers a premium viewing option. For example, YouTube is making even more money from some audiences with YouTube Premium. While YouTube’s base business model is AVOD, it offers a paid SVOD option that lets audiences watch all content without constant ad interruptions. At time of writing, a standard YouTube Premium plan costs $11.99 per month.
SVOD Model Plus Lower-Tier Subscription Option With Ads
Recently, SVOD-based platforms have been introducing advertising as a way to let customers pay a lower monthly fee. This mixed revenue model lets platforms like Netflix and Hulu capture revenue from customers who wouldn’t otherwise be able to afford, or would choose to forego, their offerings in exchange for a free or cheaper service.
Hulu’s primary business model is subscription-based. The cost of its standard, ad-free plan upon writing is $14.99 per month. However, the platform also offers a Hulu (With Ads) subscription for $7.99 per month. That means customers can access Hulu’s content for almost half the price of a traditional subscription, and Hulu can recoup some of the revenue by supplementing it with ad revenue.
Netflix offers a similar model, with basic, ad-free plans starting at $9.99 per month and a basic plan with ads going for $6.99 per month.
Freemium Model
Another hybrid revenue model involves offering a free sample of your content and then upselling a paid version of the content. For example, you could let audiences watch the first episode of a show or the first 10 minutes of a movie, for free with ads. Then, they would have to pay to watch the rest of the movie or remaining episodes by purchasing a subscription or paying to rent or buy the content.
How JW Player Supports AVOD
As a complete video platform, JW Player goes beyond AVOD, SVOD, and TVOD monetization models to help you attract an audience and keep them engaged for continued, predictable revenue. With fast video delivery at top quality, JW Player’s streaming services let your viewers consume your content on the device that’s most convenient to them. This platform will even help you optimize your fill rate and CPMs and keep viewers watching, leading to more revenue for you.
Sign up for a free, 30-day trial to see these results for yourself.